Brightree Owner ResMed to Acquire MatrixCare for $750 Million

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Health care technology company ResMed (NYSE: RMD, ASX: RMD) has signed a definitive agreement to acquire MatrixCare for $750 million.

The purchase price represents a valuation multiple of 25 times the expected calendar year 2018 pro forma EBITDA of $30 million for MatrixCare. The move allows ResMed to expand across the continuum of care, strategically melding its software-as-a-service (SaaS) offerings in home medical equipment, home health and hospice with MatrixCare’s well-established presence in the skilled nursing and senior housing spaces.

“We’ve got 300 million people in this country, and they want to age in different ways, in different settings,” ResMed CEO Mick Farrell told Home Health Care News. “We’ve got to be able to service them where they live and how they want to live.”

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San Diego-based RedMed’s current SaaS offerings built for home-based care providers include Brightree and HEALTHCAREfirst, which ResMed acquired earlier this year. ResMed acquired Brightree for $800 million in 2016.

MatrixCare, a privately held company based in Minnesota, works with thousands of providers across the United States, primarily in the skilled nursing and senior living sectors. Its tools include electronic health record software, along with resources to assist with leads, referrals, claims processing, clinical quality and payroll management.

“We were looking for another great addition, to add a third leg, if you’d like, to the stool in our out-of-hospital software investments,” Farrell said. “MatrixCare came straight to the top — it’s just a great business with really good revenues and profit, verticals in skilled nursing, senior living, life-plan communities and private duty that are 100% complementary to everything we do at Brightree and HEALTHCAREfirst.”

Under terms of the agreement, ResMed will acquire MatrixCare for $750 million. ResMed will fund the acquisition primarily with its credit facility. In calendar year 2018, MatrixCare pro forma net revenue is estimated to be about $122 million, with a pro forma EBITDA of approximately $30 million.

The official closing of the acquisition could come “within the next couple of weeks,” Farrell said. As a company, about 90% of ResMed’s global revenues — about $2 billion globally — comes from outside of the hospital setting. That makes expanding across the home health, skilled nursing, senior housing and parallel spaces all the more important to ResMed’s overarching mission, he said.

ResMed expects the transaction to be immediately accretive to non-GAAP gross margin and non-GAAP diluted earnings per share after close and beyond.

Although ResMed is expanding to facility-based settings, it will maintain a focus on home-based care.

“It’s an important mission for us to help people keep happy and healthy where they live,” said Farrell, whose father founded ResMed nearly three decades ago. “ResMed stands for respiratory medicine, but it could just as easily stand for residential medicine.”

In addition to software, ResMed provides durable medical equipment for sleep apnea and sleep suffocation. The company is also actively building its equipment business by targeting lung disease.

Senior living, in particular, is “an exiting” area to be growing in, Farrell said. ResMed’s decision to acquire MatrixCare, however, is more so about opportunities arising from bringing several care setting together and improving interoperability, efficiency and transitions of care.

ResMed is not the only technology provider that is making moves to expand its capabilities across various care settings. MatrixCare competitor PointClickCare — a Mississauga, Ontario-based company that provides EHR software to more than 15,000 long-term and post-acute facilities and home health agencies — is focused on the goal as well, through a new strategic partnership with Chicago-based PreparedHealth.

PreparedHealth’s enTouch technology enables more seamless communication among hospitals, skilled nursing, home health and other providers.

“PointClickCare is excited to allow our customers the opportunity to have a more integrated experience with enTouch,” Jeff Scheepers, director of global partnerships for PointClickCare, said in a press release issued Monday. “Our customers can now automate patient updates to hospital case managers, as well as seamlessly transition care to the very best home and community-based providers upon discharge.”

Next moves for MatrixCare

Once finalized, MatrixCare will continue to operate as a standalone business within ResMed’s SaaS portfolio, with targeted commercial, technical and operating links to ResMed and Brightree. There will be no immediate changes to management, locations or business processes.

MatrixCare CEO John Damgaard will continue in his current role, reporting to Raj Sodhi, president of ResMed’s SaaS business segment. Keeping MatrixCare’s leadership team in place was essential to the deal, Farrell said.

“A big part of the due diligence for me, before I signed on to this deal, was meeting John and his management team,” he said. “The worst thing would be to buy a company and lose all these great people.”

Following the completion of the MatrixCare transaction, ResMed intends to suspend its share repurchase program.

ResMed invests about 7% of its revenues into research and development — roughly $140 million annually. The company expects its R&D commitment to add further value to MatrixCare, perhaps through cybersecurity and machine learning know-how, Farrell said.

Despite the deal’s price tag, ResMed will remain on the lookout for future acquisition opportunities to build out its portfolio. That includes global opportunities, Farrell said, specifically naming Germany and Japan as possibilities.

“We’re not done,” he said. “This won’t be the last of our acquisitions, but we’re very selective in how we choose.”

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When Robert's not covering the latest in home health care news, you can likely find him rooting for the White Sox or roaming his neighborhood streets playing Pokemon Go. Before joining HHCN, Robert covered everything from big agribusiness to the hottest tech startups.

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